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Small Deductible Workers Comp Programs – Do They Work?

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Small Deductible Programs Can Affect Claims Reporting

Small deductible programs is always a much-discussed topic when employers are looking to cut their WC costs.

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This was a question that was emailed to me earlier this week.  We have audited the policies for a few small deductible programs.  The most recent one had a $250 deductible.  The claims were still handled by the insurance carrier from the first dollar.  After examining the policy and the results of the $250 deductible, there was no difference than if the employer had just let the insurance company pay the claim from the first dollar.

A company cannot hold the claim until it reaches the small deductible maximum and then attempt to report it late to the carrier.  This type of situation can be the recipe for disaster as a small deductible program may cause the employer to hold off reporting a very serious claim.  I have seen the late reporting on a small deductible program cause a few claims to become out of control.  A serious claim festering with the claims adjuster not knowing about the Workers Comp claim is a worst case scenario for controlling your Workers Comp claims.

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The NCCI and most State Rating Bureaus allow for a 70% discount for medical only claims as a way to encourage reporting the smallest claims.  If an employer has many medical only claims and just a few lost time claims, the 70% discount may be more attractive than this type of program.

There are quite a few states that do not allow small deductible programs due to the late reporting that may be caused by the program.   There may be a few cases where  these programs may be a successful part of a Workers Comp program.  I have not seen one in my career.

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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